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This excerpt taken from the ALL 8-K filed Feb 1, 2006. Combined
ratio excluding the effect of catastrophe losses is a non-GAAP ratio, which is computed as
the difference between the two operating ratios, combined ratio (a GAAP
measure) and the effect of catastrophes on the combined ratio. The most
directly comparable GAAP measure is the combined ratio. We believe that this
ratio is useful to investors and it is used by management to reveal the trends
in our property-liability business that may be obscured by catastrophe losses,
which cause our loss trends to vary significantly between periods as a result
of their rate of occurrence and magnitude. We believe it is useful for
investors to evaluate these components separately and in the aggregate when
reviewing our underwriting performance. The combined ratio excluding the effect
of catastrophe losses should not be considered a substitute for the combined
ratio and does not reflect the overall underwriting profitability of our
business. A reconciliation of combined ratio excluding the effect of
catastrophe losses to combined ratio is provided in the Property-Liability
Highlights table.
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